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Government says it will protect the little man in VBS fallout

Oct 26 2018 08:26
Khulekani Magubane, Fin24

Among his last written replies to questions from Members of Parliament, former minister of finance Nhlanhla Nene said any government guarantee to facilitate payment to VBS Mutual Bank would apply to deposits from ordinary clients and not to municipalities and companies.

The reply, dated 24 August 2018 for publishing, was released by Parliament on Thursday. Nene has since resigned as minister and has been replaced by Tito Mboweni, who tabled his first medium term budget policy statement on Wednesday afternoon.

Municipalities suffered millions in losses when VBS Mutual Bank was placed under curatorship after they deposited a combined amount of R1.5bn of public funds.

Municipalities that deposited their money with VBS will not be covered following the bankruptcy and plunder by its own heads and politicians, dubbed the "great bank heist" by the SA Reserve Bank.

Congress of the People MP Willie Madisha asked Nene whether government intended to provide a rescue plan or resources to spare VBS Mutual Bank liquidation.

He also asked what the rationale and details for such a rescue plan would be.

Nene said on 9 August, following the recommendation from the Registrar of Banks, the Minister placed the Venda Building Society (VBS) Mutual Bank under curatorship due to the bank being unable to honour its financial commitments. 

"Government’s primary focus is to protect ordinary retail depositors. The curatorship process is still in progress, including a forensic investigation," he said.

"Following an initial report from the curator, government has already provided a guarantee to the South African Reserve Bank amounting to R336m to facilitate the repayment of all retail deposits up to R100 000 per retail depositor, starting from Friday, 13 July 2018," said Nene.

Nene said retail deposits are defined as deposits in VBS by individuals, burial societies, stokvels and savings clubs, collectively referred to as retail depositors. 

He clarified that the guarantee does not cover municipal or corporate deposits.

Minister of Cooperative Governance and Traditional Affairs Zweli Mkhize told Parliament on Tuesday that government would not bail out municipalities that deposited their funds with the bank against the advice of the South African Reserve Bank.

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